Texas USDA Loan
Texas is a paradise for nature lovers. If you’re looking to get a Texas USDA loan for a rural area – or even just outside the city – you can get a great rate with this loan.
USDA mortgage loans are boosting development in rural areas and helping families with low or moderate income purchase homes.
This type of loan is backed by the U.S. Department of Agriculture and is designed to promote rural living and development.
If you want to live in a rural area in Texas, you may be able to qualify for a Texas USDA mortgage loan.
What is a USDA Mortgage Loan?
In order to increase rural development, the USDA works with lenders to offer these guaranteed loans.
This guarantee allows lenders to offer USDA loans with excellent low rates and no money down. Low-income borrowers in rural areas are able to purchase homes because of USDA mortgage loans.
How Do I Qualify?
In order to be approved for a USDA loan, you and the property must qualify.
The property must be located in a rural area. This means the area must have a population of less than 20,000.
In order to meet the income qualifications, you must make less than 15% above the average income for the area.
You must also be able to demonstrate that you have stable income and employment. A credit score of 640 will be required by most lenders, and your debt-to-income ratio should be below 41%.
USDA Mortgage Loans and How They Work
Rural development loans are also known as Section 502 loans.
This program was created in the 1990s to make it easier for low-income families in rural areas to become homeowners.
This type of loan is available for many borrowers because 97% of the country is classified as rural.
If you want to live in a rural area, and you meet the income requirements, a USDA loan may be the best option for you.
Low rates and 100% financing are the key characteristics of USDA mortgage loans.
There’s no prepayment penalty and no down payment required, but you will be locked into a fixed rate if you take out a USDA mortgage loan. No ARM mortgages are available through the USDA.
If you take out a USDA mortgage loan, you will be required to purchase private mortgage insurance.
How to Qualify for a USDA Mortgage Loan
To qualify for a USDA loan, you must be a United States citizen or permanent resident.
Your monthly payment must not exceed 29% of your monthly income. You must be able to verify steady income over the past 24 months, and you cannot have had any debt sent to collections within the past year.
If you want to be approved quickly and receive the most attention from lenders, it’s best to apply after you raise your credit score to at least 640.
USDA loans are designed to help people with the greatest need.
Those without safe and sanitary housing are prime candidates for USDA mortgage loans.
While you won’t be able to purchase a home in the city with this loan, some suburbs are considered rural by the USDA. You may be able to get a Houston USDA mortgage loan to purchase a home just outside of the city.
USDA Mortgages Compared to Other Mortgages
USDA mortgages usually offer the lowest rates on the market. There’s no down payment required, making them an ideal option for those who lack savings.
However, rates on USDA loans will depend on your financial situation.
A high credit score coupled with a sizeable down payment will allow you to get the best rate. The more financially strong you appear to your lender, the lower your rate will be.
Rates also vary by lender, so don’t be shy about shopping around. While many lenders don’t advertise USDA loans, most offer them.
USDA Mortgage Loans Pros and Cons
- No down payment required
- Closing costs included in the loan
- Prepay without penalty
- Low interest rates
- Only available in rural areas
- Private mortgage insurance required
- Limits on income and property type
USDA mortgage loans are a good choice for first-time and repeat home buyers who can’t secure financing through a conventional loan.
The USDA mortgage requirements for 2020 are flexible and accommodating for those with moderate income. If you don’t qualify for a conventional mortgage, you may be able to purchase your home with the help of a USDA mortgage loan.